The Ontario government plans is considering the introduction of new tax incentives in hopes of boosting the level of investment in research and development within the province.

Provincial Finance Minister Charles Souza told a gathering of the Empire Club on Nov. 4 that so-called “pay or play” policies will be introduced in the government economic update on Nov. 7.

“Our intent is to find more ways for companies to invest surplus cash that sits on their balance sheets,” said Mr. Sousa, referencing remarks made by former Bank of Canada governor Mark Carney that Canadian businesses were sitting on large stockpiles of cash that weren’t being invested in business growth.

Mr. Sousa said more details would be revealed in Thursday’s economic update, but suggested the tax incentives would essentially allow businesses that make strategic capital investments or put money into skills training to realize a better tax rate than those who do not.

“There are opportunities and ways that other parts of the world have encouraged companies to invest and they’ll give them better preference on those investments than they would if they didn’t,” he said, describing the incentives as a type of “call to arms”.

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Though specific details are scarce, the incentives seem to resemble ones that have long been offered by the federal government in the form of the Scientific Research and Experimental Development tax incentive or SR&ED. That program is currently undergoing a significant overhaul in response to a review that revealed many large corporations were using third-party accounting firms to make the incentive available to them by claiming R&D projects that would have gone ahead either way.

Such practices are contrary to the intent of SR&ED, which is supposed to offer small to medium-sized firms the opportunity to offset costs on what would otherwise have been prohibitively expensive R&D projects.

Mr. Sousa did not offer specific details on how the Province intends to ensure similar abuses do not occur with the Ontario tax incentives, but said his government is looking into it.

“We’ve established a review of all our tax credits… to ensure that we’re not falling into a situation where those tax avoidance measures are happening or we’re not investing in the initiatives that they were meant to be”

The finance minister said the incentives are intended to improve the productivity performance of the province and, more importantly, to benchmark that performance against the productivity of other nations that have historically performed better.

“What I’m saying is we need to find ways to benchmark what we do versus other parts of the world.”

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